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Echeverria SA is an Argentinia

Anonymous

labelAccounting

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Asked: Nov 23rd, 2015

Question description

Echeverria SA is an Argentinian manufacturing company whose total factory overhead costs fluctuate somewhat from year to year according to the number of machine-hours worked in its production facility. These costs (in Argentinian pesos) at high and low levels of activity over recent years are given below:

Level of Activity

Low

High

Machine-hours

58,800

78,400

Total factory overhead costs

263,660

pesos

296,980

pesos

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 58,800 machine-hours level of activity as follows:

Indirect materials (variable)

82,320

pesos

Rent (fixed)

131,000

Maintenance (mixed)

50,340

Total factory overhead costs

263,660

pesos

For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements.

Required:

1.

Estimate how much of the factory overhead cost of 296,980 pesos at the high level of activity consists of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the 296,980 pesos cost consists of indirect materials and rent. Think about the behavior of variable and fixed costs.) (Do not round intermediate calculations.)

Maintenance cost at high level of activity

pesos

2.

Using the high-low method, estimate a cost formula for maintenance. (X represent per machine-hour.) (Round the "Variable cost per machine-hour" to 2 decimal places and "Fixed cost" to the nearest whole number.)

Y =

pesos

+

peso X

3.

What total overhead costs would you expect the company to incur at an operating level of 64,680 machine-hours? (Do not round intermediate calculations. )